Finch Therapeutics Group, Inc. (FNCH)·Q3 2022 Earnings Summary

Executive Summary

• Q3 2022 featured operational progress amid financial headwinds: patient dosing began in PRISM4 (Phase 3) for CP101 in recurrent C. difficile infection, with topline data anticipated in H1 2024 .
• Reported net loss widened to $40.4M due to a non-cash $18.1M goodwill impairment, lower collaboration revenue following Takeda’s termination, and higher restructuring costs; EPS was $(0.85) .
• Guidance updates: cash runway extended into Q2 2024 (from Q1 2024 in Q2), and PRISM4 timeline clarified with dosing underway and H1 2024 topline target; autism program (FIN-211) paused amid strategic review and workforce reduction (~37%) .
• Stock-relevant catalysts: confirmation of PRISM4 patient dosing and a defined topline data window; portfolio streamlining following Takeda’s IBD exit returning rights to FIN-524/FIN-525 and the restructuring aimed at conserving capital .

What Went Well and What Went Wrong

What Went Well

• PRISM4 execution: “patient dosing now underway” in the Phase 3 CP101 trial; management evaluating protocol modifications to potentially reduce randomized size to accelerate topline timing and conserve capital .
• Translational evidence presentation: PRISM-EXT biomarker data at ACG 2022 showed increased microbiome diversity and engraftment associated with preventing recurrence through Week 8; prior PRISM-EXT efficacy of 80.3% at 8 weeks and 78.8% at 24 weeks (n=132) reiterated .
• Leadership strengthening: appointment of Howard Franklin, MD, MBA as CMO, bringing >20 years of GI and biopharma experience .

What Went Wrong

• Financial drag: net loss increased sharply to $40.4M on goodwill impairment ($18.1M) and collaboration revenue decline tied to Takeda’s August 2022 termination; restructuring expense increased .
• Program deprioritization: suspension of FIN-211 Phase 1 initiation while exploring use of third-party data; reflects capital preservation and narrowed focus .
• Revenue contraction and higher G&A: collaboration revenue down to $0.138M; G&A rose to $9.6M on professional fees, facility costs, and stock-based compensation despite reduced headcount .

Financial Results

P&L, EPS, and Operating Metrics (Oldest → Newest)

Notes: Net income margin % and other margin metrics are not meaningful given near-zero revenue; operating loss was driven by impairment and restructuring .

Balance Sheet Snapshot

Segment Breakdown

• Revenue is solely collaboration revenue; no segment reporting disclosed .

KPIs (operational)

• PRISM4 status: patient dosing underway; topline randomized portion data anticipated H1 2024 .
• Cash runway: into Q2 2024, supported by sublease inflows .

Guidance Changes

Earnings Call Themes & Trends

Note: No Q3 2022 earnings call transcript was available in the document set; themes below reflect disclosures across Q1/Q2/Q3 earnings materials and related 8-Ks.

Management Commentary

• “We are pleased with the tremendous progress our team has made recently to advance the development of our lead program, with patient dosing now underway in our PRISM4 Phase 3 trial of CP101…” — Mark Smith, PhD, CEO .
• Management is “evaluating possible modifications to PRISM4… such as a reduction in the size of the randomized portion of the trial,” aiming to accelerate topline data and conserve capital .
• On scientific validation: PRISM-EXT biomarker data showed significant increases in microbiome diversity through week 8 and 24; engraftment/diversity associated with recurrence prevention .

Q&A Highlights

• No Q3 2022 earnings call transcript was available in the filing set; Q1 featured a corporate update call and posted presentation, but no Q3 transcript is accessible here .
• Guidance clarifications and strategic updates were communicated via press releases and 8-Ks (e.g., PRISM4 dosing, H1 2024 topline, portfolio reprioritization) .

Estimates Context

• Wall Street consensus (S&P Global) for Q3 2022 EPS and revenue was not retrievable due to access limitations; therefore, comparisons to consensus are unavailable. If needed, we can refresh once S&P Global access is restored.

Key Takeaways for Investors

• Execution on CP101: PRISM4 patient dosing is a major de-risking milestone; topline H1 2024 provides a clear catalyst window .
• Financials reflect non-operational charges and revenue contraction: goodwill impairment and Takeda termination drove the wider loss; collaboration revenue was $0.138M .
• Strategic focus and capital preservation: suspension of FIN-211 Phase 1 initiation and workforce reduction (~37%) align resources to CP101 and extend runway into Q2 2024 .
• IBD optionality: full rights to FIN-524/FIN-525 returned; Finch can pursue partnerships leveraging an extensive data/IP package from the collaboration .
• Near-term trading implications: expect sentiment to hinge on PRISM4 enrollment pace, any FDA feedback on protocol modifications, and further clarity on cash runway initiatives (subleases, potential BD) .
• Medium-term thesis: CP101 Phase 3 success could be transformative; portfolio streamlining and rights regain in IBD increase optionality, but funding and execution risks remain until clinical validation .

Additional Data and Disclosures

• Revenue was negatively impacted by Takeda’s termination; management cited an $11.2M revenue decrease vs prior year linked to collaboration changes and termination .
• G&A increased on professional fees, facility costs, and stock-based compensation; partially offset by reduced headcount .
• Restructuring charges expected at ~$1.6M associated with ~37% headcount reduction; $1.270M recognized in Q3 .

Appendix: Prior Two Quarters’ Highlights

• Q2 2022: On track to proceed with PRISM4 enrollment in H2 2022; cash runway into Q1 2024 with sublease income and with Takeda milestones removed pending their portfolio review .
• Q1 2022: FDA lifted CP101 IND clinical hold; $55M debt facility with $15M drawn; runway into Q2 2024; AUSPIRE design enhancements (placebo arm) for FIN-211 .